Chapter 10 Regional econometric and dynamic models

This chapter focuses on regional econometric and dynamic models. Regional econometric models are concerned with the description, analysis, forecasting, and policy appraisal of economic development within a set of localities or regions. Such models concern not only internal structures and relationships, but also interregional interrelationships. A wide class of models has been developed for the purposes of regional economic analysis and many are concerned with the dynamics of income, demand, supply, and investment determination; others are concerned with more slowly changing structural properties relating to the layout of facilities and infrastructure and some concern the extremely rapid adjustments in the flows of people, commodities, and resources among regions. The chapter provides some major examples of dynamic regional models and discusses the methods of approach and the general linear model. A review of specification and estimation methods for a wide class of problems including nonlinear and nonstationary structures is presented in the chapter. It also briefly discusses the application of regional models to policy specification and provides a summary of research priority areas.